US court rejects SEC rule on board nominees

By the Associated Press | July 22, 2011 | 11:44 AM EDT

WASHINGTON (AP) — A federal appeals court has struck down a rule adopted last year by the Securities and Exchange Commission that gave shareholders more power to nominate board directors.

The U.S. Court of Appeals for the District of Columbia Circuit said the SEC was "arbitrary and capricious" in implementing the rule, which was widely supported by investor advocates. Judge Douglas Ginsburg said the SEC failed to estimate the cost to companies of fighting off director nominations.

The U.S. Chamber of Commerce and the Business Roundtable, a trade group of CEOs for the nation's largest companies, had challenged the rule, which was mandated under the financial overhaul passed by Congress last year.

A spokesman for the SEC said the agency is reviewing the decision and considering its options.